athenahealth Hits 52-week High, Bags New Deal

Shares of athenahealth Inc. (ATHN) reached 52-week high of $132.48 in mid-day trading last Friday following its impressive third quarter results and a new deal with Hospital Physician Partners (“HPP”). Shares of the company closed at $130.83 on Oct 18, which represented a solid one-year return of 63.4% and impressive year-to-date return of 73.4%.

The medical information systems company has a market cap of $4.8 billion. Average volume of shares traded over the last three months stood at approximately 406.7K.

HPP will deploy athenahealth’s athenaCollector, athenaCommunicator and athenaClarity services in order to streamline collections, and improve patient communications and system-wide business intelligence. It intends to treat more than 2 million patients in 2013.

athenaCollector is a revenue cycle management or (:RCM) tool that upgrades revenue streams and streamlines billing and insurance reimbursements. On the other hand, cloud-based analytics service, athenaClarity, helps health care providers with the metrics and performance insight to efficiently manage business and patient population.

Earnings

athenahealth reported adjusted earnings of $8.0 million or 21 cents per share (excluding amortization and integration and transaction costs) in the third quarter of the year, exceeding the Zacks Consensus Estimate of 15 cents per share. This translated into a 15.5% rise in net earnings from $7.0 million and 10.5% rise in earnings per share from 19 cents in the comparable quarter a year ago.

Revenues in the quarter surged 43.1% to $151.5 million but missed the Zacks Consensus Estimate of $155 million. Excluding Epocrates and other revenues (consisting of third-party tenant revenues) totaling $17.2 million, core athenahealth revenues rose 27% to $134.3 million. Growth was led by expanded clientele for the company’s offerings since the acquisition of Healthcare Data Services and strong athenaCoordinator business.

Our Take

Currently, ATHN carries a Zacks Rank #3 (Hold). While we prefer no other stocks from the medical information systems industry at this moment other than Cerner Corporation (CERN) with a Zacks Rank #2 (Buy), we view Bio-Rad Laboratories, Inc. (BIO) and INSYS Therapeutics, Inc. (INSY) from the medical products industry as worth considering. Both of them carry a Zacks Rank #1 (Strong Buy).